Chapter 15 RETAILERS WHOLESALER S AND DIRECT MARKETERS

Chapter 15 RETAILERS, WHOLESALER S, AND DIRECT MARKETERS © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1

Chapter 15 Retailers, Wholesalers, and Direct Marketers Objectives 1. Explain the wheel of retailing. 2. Discuss how retailers select target 3. 4. markets. Show the elements of the marketing mix apply to retailing strategy. Explain the concepts of retail convergence and scrambled merchandising. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2

Chapter 15 Retailers, Wholesalers, and Direct Marketers Objectives 5. Identify the functions performed by 6. 7. 8. wholesaling intermediaries. Outline the major types of independent wholesaling intermediaries and the appropriate situations for using each. Compare the basic types of direct marketing and nonstore retailing. Describe how much the Internet has altered the wholesaling, retailing, and direct marketing environments. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3

Chapter 15 Retailers, Wholesalers, and Direct Marketers Retailing ▮ Activities involved in selling merchandise to ultimate consumers ▮ Large and small retailers perform the major channel activities: • Creating time, place, and ownership utilities ▮ Retailers act as both customers and marketers in their channels © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4

Chapter 15 Retailers, Wholesalers, and Direct Marketers Evolution of Retailing ▮ The general store – First type of retail institution ▮ Rise of supermarkets in the early 1930 s ▮ Discount stores in the 1950 s ▮ Convenience stores in the 1960 s ▮ Off-price retailers in the 1980 s and 1990 s © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5

Chapter 15 Retailers, Wholesalers, and Direct Marketers Evolution of Retailing ▮ Wheel of retailing - Hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current suppliers charge, the result of reducing or eliminating services © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6

Chapter 15 Retailers, Wholesalers, and Direct Marketers Retailing Strategy ▮ Retailers base key decisions on two fundamental steps in the marketing strategy process • Selecting a target market • Developing a retailing mix to satisfy the chosen market © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7

Chapter 15 Retailers, Wholesalers, and Direct Marketers Figure 15. 1 – Components of Retail Strategy © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8

Chapter 15 Retailers, Wholesalers, and Direct Marketers Selecting a Target Market ▮ Size of the market ▮ Profit potential of the market ▮ Level of competition © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9

Chapter 15 Retailers, Wholesalers, and Direct Marketers Merchandising Strategy ▮ Guides retailer’s decisions on the items it will offer ▮ While developing the merchandise mix, retailers should consider: • Needs and preferences of its target market • The competitive environment • Overall profitability of each product line and category © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10

Chapter 15 Retailers, Wholesalers, and Direct Marketers Category Management ▮ Seeks to improve retailer’s product performance through coordinated buying, merchandising, and pricing ▮ Evaluates performance according to each product category ▮ Categories that underperform may be dropped even if they are strong brands © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11

Chapter 15 Retailers, Wholesalers, and Direct Marketers The Battle for Shelf Space ▮ Proliferation of new products and variations on existing ones has increased the competition for shelf space ▮ Stock-keeping unit (SKU) - Offering within a product line © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12

Chapter 15 Retailers, Wholesalers, and Direct Marketers The Battle for Shelf Space ▮ Major retailers increasingly make demands from manufacturers in return for shelf space • Slotting allowances - Nonrefundable fees grocery retailers receive from manufacturers to secure shelf space for new products © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13

Chapter 15 Retailers, Wholesalers, and Direct Marketers Customer Service Strategy ▮ Heightened customer service is one possible retailing strategy ▮ The goal is to attract and retain target customers to increase sales and profits ▮ Some services that retailers could provide: • Enhanced comfort through lounges, complimentary coffee, convenient restrooms • Child-care services for customers • Virtual assistance programs © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14

Chapter 15 Retailers, Wholesalers, and Direct Marketers Pricing Strategy ▮ Prices reflect a retailer’s marketing objectives and policies ▮ They affect consumer perceptions © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15

Chapter 15 Retailers, Wholesalers, and Direct Marketers Markups and Markdowns ▮ Markup - Amount a retailer adds to the cost of a product to determine its selling price ▮ Markup is influenced by two factors: • Services performed by the retailer • Inventory turnover rate ▮ Markdown - Amount by which a retailer reduces the original selling price of a product © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16

Chapter 15 Retailers, Wholesalers, and Direct Marketers Location/Distribution Strategy ▮ Location depends on many factors • • Type of merchandise The retailer’s financial resources Characteristics of the target market Site availability © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17

Chapter 15 Retailers, Wholesalers, and Direct Marketers Locations in Planned Shopping Centers ▮ Planned shopping center - Group of retail stores planned, coordinated, and marketed as a unit • Includes five main types: • • • Neighborhood shopping center Community shopping center Regional shopping center Power center Lifestyle center © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18

Chapter 15 Retailers, Wholesalers, and Direct Marketers Promotional Strategy ▮ Promotion informs customers about locations, merchandise selections, hours of operation, and prices ▮ Helps retailers attract shoppers and build customer loyalty ▮ National chains purchase advertising in print and broadcast media © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19

Chapter 15 Retailers, Wholesalers, and Direct Marketers Promotional Strategy ▮ Salespeople play an important promotional role • Selling up • Suggestion selling ▮ Poor service can influence customers’ attitudes about a retailer © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20

Chapter 15 Retailers, Wholesalers, and Direct Marketers Store Atmospherics ▮ Atmospherics - Combination of physical characteristics and amenities that contribute to a store’s image ▮ Includes exterior and interior décor © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21

Chapter 15 Retailers, Wholesalers, and Direct Marketers Figure 15. 2 – Bases for Categorizing Retailers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification of Retailers by Form of Ownership ▮ Chain stores • Groups of retail outlets that operate under central ownership and management and handle the same product lines • Volume purchases allow chains to pay lower prices than their independent rivals must pay © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification of Retailers by Form of Ownership ▮ Independent retailers • Generate about $4. 7 trillion in retail sales in a recent year • Traditional advantage is friendly, personalized service © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification by Shopping Effort ▮ Convenience retailer - Focuses marketing appeals on: • • Accessible locations Extended store hours Rapid checkout services Adequate parking facilities ▮ Shopping stores - Offer potential customers the chance to compare pricing, assortment, and quality levels © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification by Shopping Effort ▮ Specialty retailer - Store that combines carefully defined product lines, services, and reputation to: • Persuade shoppers to spend considerable shopping effort there © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification by Services Provided ▮ Classification system consists of three retail types: • Self-service • Self-selection • Full-service retailers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification by Product Lines ▮ Specialty stores - Handles only part of a single product line ▮ Label specialty - The practice of handling a specific, narrow line of merchandise © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification by Product Lines ▮ Limited-line retailers • Offer a large assortment of products within one product line or a few related lines • Category killer - Offers huge selections and low prices in single product lines © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29

Chapter 15 Retailers, Wholesalers, and Direct Marketers General Merchandise Retailers ▮ General merchandise retailer - Store that carries a wide variety of product lines, stocking all of them in some depth ▮ Variety stores • Offer an extensive range and assortment of lowprice merchandise • Declining in popularity © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30

Chapter 15 Retailers, Wholesalers, and Direct Marketers General Merchandise Retailers ▮ Department stores • A series of limited-line and specialty stores under one roof • Faced intense competition from discount stores, Internet retailers, and hypermarkets • Fought back by: • Eliminating poorly performing lines • Opening in new locations • Modernizing their stores © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31

Chapter 15 Retailers, Wholesalers, and Direct Marketers Mass Merchandiser ▮ Store that stocks a wider line of goods than a department store, usually without the same depth of assortment within each line © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32

Chapter 15 Retailers, Wholesalers, and Direct Marketers Mass Merchandisers ▮ Four types • Discount houses - Charge low prices and offer fewer services • Off-price retailers - Stock only designer labels at prices equal to or below regular wholesale prices and then passes the cost savings along to buyers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33

Chapter 15 Retailers, Wholesalers, and Direct Marketers Mass Merchandisers • Hypermarkets - Giant one-stop shopping facilities that offer wide selections of grocery and general merchandise products at discount prices • Supercenter - Large store, usually smaller than a hypermarket, that combines groceries with discount store merchandise • Showroom and warehouse retailers - Send direct mail to their customers and sell the advertised goods from showrooms that display samples © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34

Chapter 15 Retailers, Wholesalers, and Direct Marketers Classification of Retail Transactions by Location ▮ Most retail transactions occur in stores ▮ Nonstore retailing is used for generating orders for both consumer and B 2 B marketers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35

Chapter 15 Retailers, Wholesalers, and Direct Marketers Retail Convergence and Scrambled Merchandising ▮ Retail convergence - Situation in which similar merchandise is available from multiple retail outlets • Resulting in the blurring of distinctions between type of retailer and merchandise offered ▮ Scrambled merchandising - Retailing practice of combining dissimilar product lines to boost sales volume © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36

Chapter 15 Retailers, Wholesalers, and Direct Marketers Wholesaling Intermediaries ▮ Wholesaler - Channel intermediary that takes title to goods it handles and distributes these goods to retailers, other distributors, or B 2 B customers ▮ Wholesaling intermediary - Comprehensive term that describes wholesalers as well as agents and brokers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37

Chapter 15 Retailers, Wholesalers, and Direct Marketers Functions of Wholesaling Intermediaries ▮ Creating utility • Time utility - Making products available for sale when consumers want to purchase them • Place utility - Helping deliver goods and services for purchase at convenient locations • Ownership utility - Smooth exchange of title to the products from producers or intermediaries to final purchasers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 38

Chapter 15 Retailers, Wholesalers, and Direct Marketers Table 15. 1 – Wholesaling Services for Customers and Producer-Suppliers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39

Chapter 15 Retailers, Wholesalers, and Direct Marketers Figure 15. 3 – Transaction Economies through Wholesaling Intermediaries © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40

Chapter 15 Retailers, Wholesalers, and Direct Marketers Figure 15. 4 - Major Types of Wholesaling Intermediaries © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 41

Chapter 15 Retailers, Wholesalers, and Direct Marketers Table 15. 2 - Comparison of the Types of Merchant Wholesalers and Their Services © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 42

Chapter 15 Retailers, Wholesalers, and Direct Marketers Table 15. 3 - Services Provided by Agents and Brokers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 43

Chapter 15 Retailers, Wholesalers, and Direct Marketers Direct Marketing and Other Nonstore Retailing ▮ Direct marketing - Direct communications, other than personal sales contacts, between buyer and seller, designed to: • Generate sales, information requests, or store or website visits © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 44

Chapter 15 Retailers, Wholesalers, and Direct Marketers Direct Mail ▮ Comes in a variety of forms, including postcards, letters, and catalogs ▮ Can narrowly target a market, achieve good coverage, send messages quickly, and personalize mailing pieces ▮ Relatively high response rates © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 45

Chapter 15 Retailers, Wholesalers, and Direct Marketers Direct Mail ▮ ▮ ▮ High per-reader cost Effectiveness depends on quality Considered “junk mail” by some consumers Relies on database technology Includes catalog marketing © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 46

Chapter 15 Retailers, Wholesalers, and Direct Marketers Direct Selling ▮ Manufacturers sell directly to consumers © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 47

Chapter 15 Retailers, Wholesalers, and Direct Marketers Direct-Response Retailing ▮ Customers order merchandise by mail or telephone, by visiting a mail-order desk in a retail store, or by computer or fax machine ▮ Increasingly reaching buyers through the Internet and through unique catalogs ▮ Includes home shopping aided by television promotion, such as infomercials © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 48

Chapter 15 Retailers, Wholesalers, and Direct Marketers Telemarketing ▮ Direct marketing conducted by telephone ▮ Most frequently used form of direct marketing © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 49

Chapter 15 Retailers, Wholesalers, and Direct Marketers Internet Retailing ▮ Selling directly to consumers via virtual storefronts ▮ Internet-based retailers keep little or no inventory • Fill customer orders directly from vendors ▮ Some traditional brick-and-mortar stores have successfully extended their presence to the Web © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 50

Chapter 15 Retailers, Wholesalers, and Direct Marketers Automatic Merchandising ▮ Uses vending machines to offer a wider variety of goods ▮ As technology advances, high-end products are being sold in vending machines © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 51

Chapter 15 Retailers, Wholesalers, and Direct Marketers Ga. Ga Sher. Better Video http: //www. cengage. com/marketing/book_content/boone_9781133628460 /videos/ch 15. html Scripps Networks Interactive & Food Network Video http: //www. cengage. com/marketing/book_content/boone_9781133628460/ videos/part 5. html © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 52